Event-Driven

KKR has launched its deal early to make life difficult for Bain, who has Founding Family support, due diligence, and another hearing with the company to make a Binding Bid.
The combination of Bain’s PR on 3 September and the new documents out late last night from KKR and Fuji Soft show a picture of KKR/3D somehow acting coercively.
This is something of a mess. It should become a case study for lawyers/advisors of what NOT to do when a large PE firm approaches you. Expect a bun fight.

Quiddity Leaderboard S&P 500 Sep 24 Rebal (Final): 2 Changes Possible

The S&P 500 index tracks the 500 largest names listed in the US and it is one of the most highly-tracked indices in the world.
The rankings used for the September 2024 index rebal event will be based on yesterday’s (4th September 2024) opening prices.
In this insight, we take a final look at the potential ADDs and DELs leading the rankings for the upcoming review.

KOSPI Size Index Reshuffle Results Out Late Today: Early Positioning Delivered Big Gains

For this September reshuffle, fewer factors affected price impact, so outlier chances were low. Biggest price moves typically occur 30 days before the effective date, especially during LARGE↔MID transitions.
Early positioning for this reshuffle paid off. Past trends suggest price action fades before the effective date, so consider exiting positions by tomorrow or early next week.
Small→Mid migrants historically show weak price impacts, with no clear correlation observed in this September reshuffle either. I’m avoiding those plays targeting the effective date for now.

Xingda Int’l (1899 HK): Another Partial?

Back on the 7 Dec 2023, Xingda International (1899 HK) announced a partial Offer from a consortium comprising management at HK$1.88/share.
The consortium, at the time, held 45%, with the objective to hold >50.01% at the close of the Offer. The final % was 50.42%.
The consortium was then free to take their stake up to 75%. However the shareholder structure has materially changed in 2024. Xingda is suspended (again) pursuant to the Takeovers Code.

S&P MidCap 400 September 2024 Forecasts: Highest Score to the HOOD, CVNA, LPLA, ENTG, ENSG and MLI

By Dimitris Ioannidis

S&P MidCap 400 additions by transition require market cap, float cap, sector balance, liquidity and earnings as parameters for inclusion.
The highest combined score from the parameters is given to CVNA, HOOD, LPLA and ENTG which makes them acceptable candidates for addition.
Ensign Group (ENSG US) and Mueller Industries (MLI US) have the highest probability of being added out of the migrations. Market cap of migration candidates is estimated to be insufficient.

Pasco (9232 JP): Secom (9735 JP) And Itochu (8001 JP) Tender Offer a Done Deal

Pasco Corp (9232 JP) has recommended a tender offer from Secom Co Ltd (9735 JP) and Itochu Corp (8001 JP) at JPY2,140, 31.4% premium to the undisturbed price of JPY1,629.
The tender offer runs from 6 September to 22 October (30 business days), with payment commencing on 28 October. It represents a 10-year high.
This a done deal as the offeror represents a 71.66% ownership ratio, higher than the two-thirds of voting rights required to implement a squeeze-out through share consolidation.

Xingda (1899 HK): Management to Reload with a Partial Offer?

Xingda International (1899 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers.
Significant changes in substantial shareholders have occurred since the previous partial offer closed on 10 March 2023, which could be the catalyst for an offer.
Management is likely reloading a partial offer to exercise statutory control and bypass the 2% creeper rule. The partial offer price could be around HK$1.60-1.70 per share.

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Sep 05

Daily Brief Event-Driven: Sep24 Nikkei 225 Review Results: A Slightly Baffling 2 IN and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Sep24 Nikkei 225 Review Results: A Slightly Baffling 2 IN, 2 OUT
Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped
Fuji Soft (9749 JP): KKR’s Cop-Out as It Launches at Unchanged Terms, Next Move Bain
For Long-Term Investors, Seven & I Is the Better Bet
Australia/NZ Real Estate: Stocks With (Large) Passive Flows
Ecopro HN: Rights Offering of 200 Billion Won
Hojeon: Activist Minority Investors Threaten to Sell Their Shares to a Competitor in a Block Deal
FXI Rebalance: China Tower (788 HK) Will Replace CICC (3908 HK)
POSCO’s Early EB Payoff and Post-Value-Up Pivot Trading Angles
Namoi Cotton (NAM AU): Louis Dreyfus Declares Offer Unconditional

Sep24 Nikkei 225 Review Results: A Slightly Baffling 2 IN, 2 OUT

Today, the Nikkei Index Committee decided to delete Nippon Paper (3863) for low liquidity, and DIC (4631) for sector over-representation, and added Nomura Research Institute (4307) and Ryohin Keikaku (7453).
The only auto-delete was Nippon Paper. The DIC delete was “discretionary.” But they could have done a third. Why did they not do a third change? I do not know.
The whole shebang should be ¥350-375bn a side. At current price, Fast Retailing is set for another capping (selling) event in March 2025. And there is one shoo-in then too.

Nikkei 225 Index Rebalance: NRI, Ryohin Keikaku IN; Nippon Paper, DIC OUT; Fast Retailing Capped

Nomura Research Institute (4307 JP) and Ryohin Keikaku (7453 JP) will replace Nippon Paper Industries Co L (3863 JP) and Dic Corp (4631 JP) in the Nikkei 225 (NKY INDEX).
Fast Retailing (9983 JP)‘s CPAF will drop from 3 to 2.7 and there will be further selling in March 2025 as the CPAF drops to 2.4 (or possibly even 2.1!)
Passives will need to buy 7-15x ADV (13-14% of real float) in the adds and sell 2.7-6.5x ADV in the deletes. There is a big reverse funding trade too.

Fuji Soft (9749 JP): KKR’s Cop-Out as It Launches at Unchanged Terms, Next Move Bain

In response to the potential Bain competing offer for Fuji Soft Inc (9749 JP), KKR has waived the precondition and launched its offer at unchanged JPY8,800 per share.
Bain’s due diligence ends on 20 September, and it aims to submit a binding proposal in October. This timeline will thwart KKR’s offer, which closes on 21 October.
KKR’s offer launch at unchanged terms is delaying the inevitable and will have to bump to succeed. A potential bidding war is likely to push the offer price to JPY10,500.

For Long-Term Investors, Seven & I Is the Better Bet

By Michael Causton

The Couche-Tard “friendly bid” raises more questions than it answers: Is it real? What does CT really want? Can it afford it? Will the Japanese government let it through?
We remain sceptical about a bid – if it happens – succeeding. Either way, Seven & Eleven Japan looks to be the much better retailer.
It has been selling 25-40% more than competitors in the world’s toughest CVS market and looks set to extract more value in Japan/overseas than anyone else could so why sell?

Australia/NZ Real Estate: Stocks With (Large) Passive Flows

There will be passive buying in Nextdc Ltd (NXT AU) and Charter Hall (CHC AU) and selling in Vital Healthcare Property Trust (VHP NZ) at the close on 20 September.
Charter Hall (CHC AU)‘s stock price jumped following announcement of results and that was accompanied by big short covering. There should still be more positioning here.
Nextdc Ltd (NXT AU)‘s increase in cumulative excess volume came on a drop in the stock price. There could be some covering here as positioning builds up.

Ecopro HN: Rights Offering of 200 Billion Won

On 4 September, Ecopro HN announced that it plans to conduct a rights offering capital raise of about 200 billion won.
The company plans to issue 5.67 million new shares and the expected rights offering price is 35,300 won (23% lower than current price).
We would not subscribe to this rights offering mainly due to lofty valuations, declining sales and profit growth, continued negative free cash flow, and concerns about excessive shares dilution.

Hojeon: Activist Minority Investors Threaten to Sell Their Shares to a Competitor in a Block Deal

A group of minority investors started to go activist on Hojeon (111110 KS), demanding that the company increase its treasury share buybacks/cancellations, dividends, and cut CEO’s salary.
This coalition of minority investors has threatened to sell their shares to a competitor (Hansae) if the company does not abide by their demands.
Hojeon has attractive valuations and are trading at low multiples. It had P/E of 5x, EV/EBITDA of 3.4x, and P/B of 0.5x in 2023.

FXI Rebalance: China Tower (788 HK) Will Replace CICC (3908 HK)

China Tower (788 HK) will replace China International Capital Corporation (3908 HK) in the iShares China Large-Cap (FXI) (FXI US) at the close on 20 September.
The appears to be a lot more positioning and short interest in China International Capital Corporation (3908 HK) compared to China Tower (788 HK).
The listing of Midea Group Co Ltd A (000333 CH) H-shares could result in another change for the ETF prior to the next scheduled rebalance in December.

POSCO’s Early EB Payoff and Post-Value-Up Pivot Trading Angles

Key watchpoints: Will POSCO cancel the 3.4% treasury shares in Q4 and how will they replenish cash reserves after paying ₩1.5 trillion? Their moves could set trends.
POSCO might cancel these shares to boost their value-up index weight. This could drive up the stock price, giving them an opening to improve their cash position through equity financing.
Expect a short-term stock pivot with value-up index and ETFs driving inflows and price pops. After this, equity financing may signal stock peaks, with POSCO and others leading the trend.

Namoi Cotton (NAM AU): Louis Dreyfus Declares Offer Unconditional

Louis Dreyfus Company (LDC) and Olam (OLG SP)‘s Olam Agri have been going toe-to-toe over Namoi Cotton (NAM AU) since the 1st February. LDC has now declared its Offer unconditional.
It’s an interesting move. Namoi is trading through LDC’s A$0.67/share Offer terms. But unlike Olam’s Offer, LDC now has FIRB and ACCC under its belt.
Currently trading at Olam’s A$0.70/share terms. All eyes are on ACCC giving Olam the green light. Or not.

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Sep 04

Daily Brief Event-Driven: [JAPAN ACTIVISM] Murakami Group Now 19+% on Exedy (7278) – LOTS of Room Left To Run and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

[JAPAN ACTIVISM] Murakami Group Now 19+% on Exedy (7278) – LOTS of Room Left To Run
Select Sector Indices – Updated Flows as Round-Trip Trade Hits US$35bn
Fuji Soft (9749 JP): Bain’s Rumoured Counteroffer
HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Sep 2024)
Trading Plays on Samsung C&T’s Holding Company Shift and Biologics Share Sell-Off
Hang Seng, HSCEI, HSTECH Sep24 Rebal Final Capping Flows
Nationwide/Virgin Money (VUK AU): At The Pointy End Of The Offer
MSC Aug 24 Rebalance: Brazil Takes the EM Flow, SA & China Downweighted Again (Tencent)
Potential Sale of SK Specialty and Deleveraging of the SK Group – Impact on SK Inc and NAV Analysis
Samsung C&T: Corporate Value-Up + Reduced Overhang Post Final Lee Family Inheritance Tax in 2025

[JAPAN ACTIVISM] Murakami Group Now 19+% on Exedy (7278) – LOTS of Room Left To Run

In late May, Toyota Group member Aisin (7259 JP) announced it would sell its 37% stake in Exedy Corp (7278 JP) . The market dropped. But that was the opportunity.
On 30 May, I said “Buy the deal, buy in the market. It’s cheap and vulnerable.” It’s up 21.5% since (the day after). Peers are down 15-20%.
The company completed its buyback. Murakami Group bought more. The stock (pro-forma) is at 0.62x book, 0.54x book for the non-cash portion. There’s LOTS of cash left.

Select Sector Indices – Updated Flows as Round-Trip Trade Hits US$35bn

The changes to the S&P 500 INDEX (SPX INDEX), S&P400 Index and S&P600 Index will be announced after market close on Friday.
The conclusions of the market consultation to change the index weighting methodology for the Select Sector Indices to reduce concentration and avoid reverse turnover should also be announced.
Changes in the index weighting methodology will result in a round-trip trade of US$35bn across the Select Sector indices. The largest turnover is in the XLP and XLK.

Fuji Soft (9749 JP): Bain’s Rumoured Counteroffer

Nikkei reports that Bain will launch a competing tender offer for Fuji Soft Inc (9749 JP) around JPY9,200-9,300 per share, around 5% higher than KKR’s offer.
The Board responded that Bain submitted a non-binding proposal on 26 July. The special committee will consider its feasibility if a binding proposal is submitted.
KKR has three options to respond to a higher Bain offer: revise it, launch a hostile offer at unchanged terms, or walk away. The first option is the most likely.

HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Sep 2024)

The September rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
The round-trip trade across all stocks across the four indices is estimated at HK$18.1bn (US$2.3bn).
Kuaishou, ASM Pacific Technology, JD.com, J&T Global, Sunny Optical and New Oriental Education are the largest buys while Alibaba, Tencent, Meituan, Xiaomi and HSBC Holdings are the biggest sells.

Trading Plays on Samsung C&T’s Holding Company Shift and Biologics Share Sell-Off

Samsung C&T’s holding company ratio is closing in on 50%, driven by the Biologics rally, which has Samsung on high alert for a forced conversion.
Watch Samsung’s moves to avoid forced holding company status. The old Biologics-for-Electronics swap isn’t viable, so they’ll likely sell Biologics shares to lower the ratio.
Samsung C&T might sell Biologics shares at a ₩80T market cap. They’ve boosted construction to manage assets and the holding ratio, but beyond ₩80T, risks increase.

Hang Seng, HSCEI, HSTECH Sep24 Rebal Final Capping Flows

The close of 3 September 2024 was the final price to determine capping for the Hang Seng Index Rebalances which will take place this Friday 6 September 2024 at close.
The numbers are largely unchanged, though price changes in the interim cause more Kuaishou Technology (1024 HK) to be bought, and more Xiaomi Corp (1810 HK) to be sold.
The biggest name in flows is, of course, ASM Pacific Technology (522 HK) which sees 15 days to buy.

Nationwide/Virgin Money (VUK AU): At The Pointy End Of The Offer

Back on the 21st March, Virgin Money UK (VUK AU/VMUK LN), UK’s sixth largest retail bank, entered into a Scheme with Nationwide Building Society, at 220 pence/share, in cash.
The consideration is a solid 38% premium to undisturbed. And shareholders backed terms at the 22nd May Court Meeting. Plus UK’s CMA signed off on the 19th July.
What now? FCA/PRA approvals are the key remaining conditions. These regulatory approvals are imminent.

MSC Aug 24 Rebalance: Brazil Takes the EM Flow, SA & China Downweighted Again (Tencent)

By Charlotte van Tiddens, CFA

South Africa was downweighted in ACW, EM and EM ex China for a second consecutive quarter.
Brazil was the largest upweight in ACW, EM and EM ex China.
Tencent was downweighted in the EM index but upweighted in ACW.

Potential Sale of SK Specialty and Deleveraging of the SK Group – Impact on SK Inc and NAV Analysis

In this insight, we discuss the potential sale of SK Specialty by SK Inc (034730 KS) which owns 100% stake in the company.
If SK Inc could sell SK Specialty at about 3 trillion won to 4 trillion won, this could reduce significantly reduce debt burden of SK Inc.
Our base case NAV value per share for SK Inc is 203,288 won per share, representing 38% upside from current levels.

Samsung C&T: Corporate Value-Up + Reduced Overhang Post Final Lee Family Inheritance Tax in 2025

We provide an updated NAV analysis of Samsung C&T, discuss the reduced overhang post final Lee family inheritance tax payment, and also provide further details of its Corporate Value-Up announcement.
Given 2025 will be the last year of major inheritance tax payment for the Lee family, there is likely to be reduced overhang associated with inheritance tax issue next year.
Our NAV analysis of Samsung C&T suggests NAV of 39.9 trillion won or NAV per share of 224,249 won which is 45% higher from current levels.

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Sep 03

Daily Brief Event-Driven: Sep24 Nikkei 225 Rebal – Last Minute Thoughts and Change in Predictions and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Sep24 Nikkei 225 Rebal – Last Minute Thoughts and Change in Predictions
Midea A/H Listing – 1H24 Updates – Strong Growth, Margins Uptick Continues
Today’s Battery Rally Offers a Great Angle for Sector Pair Trading with Value-Up Stocks
India: Potential Adds/Deletes from F&O Segment
China ETF Inflows & Implications: YTD Inflows Near US$100bn
Japan CorpGovReport Details: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Sep24)
POSCO Group Corporate Value Pre-Announcements: Trading Angle
PSC Insurance (PSI AU): A Done Deal
India: Index Implications of Additions to the F&O Segment
PSC Insurance (PSI AU): 26th Sept Vote On Ardonagh Group’s Offer

Sep24 Nikkei 225 Rebal – Last Minute Thoughts and Change in Predictions

The last two reviews have been announced on the second business day of the month of the review. The one before that on the third business day.
The review could be announced today or tomorrow. Wednesday would seem to be “late.”
There are still questions about implementation – thus “care” in previous insights. Here I explore the possibilities/probabilities/issues around the edges. And a Dark Horse which may be lighter than thought.

Midea A/H Listing – 1H24 Updates – Strong Growth, Margins Uptick Continues

By Sumeet Singh

Midea Group Co Ltd A (000333 CH), recently filed its PHIP as it aims to raise up to US$3bn in its H-share listing, as per media reports.
Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
We have covered the company and deal background in our previous notes. In this note, we talk about the updates from its 1H24 results.

Today’s Battery Rally Offers a Great Angle for Sector Pair Trading with Value-Up Stocks

Today’s surge in Korean battery stocks stems from sector rotation and improved fundamentals, with SK On’s healthier balance sheet and Samsung SDI’s new U.S. plant fueling optimism.
But with POSCO affiliates showing standout performance relative to their peers., the value-up factor is once again shaking things up and driving those differences in relative performance.
Today’s price action suggests using the value-up factor for long-short strategies, especially with KRX hinting at sector quotas in the value-up index.

India: Potential Adds/Deletes from F&O Segment

Following SEBI’s review of eligibility criteria for entry/exit of stocks in the derivatives segment, there could be 18 deletions/79 inclusions in the F&O segment over the next 6 months.
The new framework could lead to mechanical entry and exit of stocks in the F&O segment with minimal intervention from SEBI.
The introduction of some large cap stocks in the F&O segment could lead to their inclusion in the NIFTY Index, SENSEX Index and other local indices.

China ETF Inflows & Implications: YTD Inflows Near US$100bn

Nearly US$100bn has flowed into mainland China listed ETFs year to date and could be driven by the National Team led by Central Huijin supporting the market.
Nearly all the net inflows have been focused on the CSI 300, CSI 1000, CSI 500, SSE50, ChiNext and STAR50 indices. Flows to sector ETFs have been mixed.
Over 70% of the net inflows have gone to the CSI 300 Index with another 18% going to the CSI 500 Index and CSI 1000 Index.

Japan CorpGovReport Details: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Sep24)

June/July/August saw 1,673/825/202 new Corporate Governance Reports filed and 8/5/9 new “Mgmt Conscious of Capital Cost/Stock Price” policies filed, respectively. The TSE’s very simple tool comes in 15 days.
Our tools show every report, links to every document, and now a new diff file tool. input a name, see the difference between the Old/New Reports. We hope it helps.
This tool is designed to be a shelf reference. We update it once a month, and every CorpGovReport and new “Management Conscious” report updated since a CGR update is here.

POSCO Group Corporate Value Pre-Announcements: Trading Angle

On 29 August, the three major POSCO Group companies including POSCO Holdings announced that they plan to provide detailed explanations of their Corporate Value Up plans in 4Q 2024.
In general, the companies that have provided more detailed plans for their Corporate Value Up plans have done better recently.
However, now there are cases such as the three main POSCO Group companies whose share prices are rising just by announcing that they will provide Corporate Value Up plans later.

PSC Insurance (PSI AU): A Done Deal

On 22 August, the Psc Insurance (PSI AU) IE considered Ardonagh’s A$6.19 offer fair and reasonable as it is within the A$5.69 to A$6.65 valuation range.
The offer is conditional on shareholder approval of the scheme. No disinterested shareholder holds the 25% blocking stake. The scheme meeting is on 26 September.
The offer is attractive and represents an all-time high. At the last close and for the 11 October payment, the gross/annualised spread is 1.3%/12.1%.

India: Index Implications of Additions to the F&O Segment

Following SEBI’s review of eligibility criteria for entry/exit of stocks in the derivatives segment, there could be 18 deletions/79 inclusions in the F&O segment over the next 6 months.
The introduction of some stocks in the F&O segment could lead to their inclusion in the NIFTY, SENSEX, Nifty Bank and CNXIT indices and weight changes in the Nifty Next50.
The inclusion of stocks in indices with a fixed number of constituents will result in deletion of some stocks from these indices. There should be methodology changes too.

PSC Insurance (PSI AU): 26th Sept Vote On Ardonagh Group’s Offer

Back on the 8th May, PSC Insurance (PSI AU), a diversified insurance service provider, entered into a Scheme with Ardonagh Group, at A$6.19/share, in cash.
That’s a 27.6% premium to undisturbed, and a lifetime high. Directors and key executives holding ~39.6% of shares out, are supportive.
The Scheme Booklet is now out, with a Scheme Meeting to be held on the 26th September. Expected implementation on the 11 October. The IE says fair & reasonable.

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Sep 02

Daily Brief Event-Driven: Artisan Partners Writes a Letter To the 7&I Board (3382) – Meh… and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Artisan Partners Writes a Letter To the 7&I Board (3382) – Meh…
Quiddity STAR 50/100 Sep 24 Rebalance: 100% Hit Rate; US$1bn+ One-Way Flows
STAR50/STAR100 Index Rebalance: Adds Rally, Deletes Drop as Positioning Builds Up
Merger Arb Mondays (02 Sep) – Canvest, China TCM, GA Pack, CPMC, Shinko, Arvida, SilverLake
Bajaj Housing Finance IPO: Offering Details & Index Inclusion
CPMC Holdings (906.HK) Privatization Update – ORG Is Pushing Baosteel to Raise Its Offer
HK Connect SOUTHBOUND Flows (To 30 Aug 2024); Weak Econ Data, But a Rebound in SB Net Buys
Alpha Generation Through Share Buybacks in Korea: Bi-Monthly (July and August 2024)
A/H Premium Tracker (To 30 Aug 2024): SB/NB Volumes Down, NB Net Now Impossible to Track
EQD / NSE Vol Update / Skew & PCR Indicate Active Use of OTM Puts to Hedge NIFTY50 at All-Time-Highs

Artisan Partners Writes a Letter To the 7&I Board (3382) – Meh…

On 30 August, 7&i shareholder Artisan Partners (holder since 2019, now at 1%) wrote an open letter to the Board of Directors of Seven & I Holdings (3382 JP)
There are several comments in bold. “It is imperative that the board of directors negotiate with ACT immediately to achieve the best possible outcome for shareholders” is one.
The letter is a bit preachy, a bit fluffy, and a bit misleading in parts. But it requests the Company brief shareholders on the negotiations by 19 September 2024.

Quiddity STAR 50/100 Sep 24 Rebalance: 100% Hit Rate; US$1bn+ One-Way Flows

By Janaghan Jeyakumar, CFA

The September 2024 index review results for the STAR 50 and STAR 100 indices were announced after market close on Friday 30th August 2024.
There will be 2 changes for the STAR 50 index and 6 changes for the STAR 100 index.
The STAR 50 and STAR 100 rebalances will collectively trigger one-way flows of more than US$1bn during the September 2024 index rebal event.

STAR50/STAR100 Index Rebalance: Adds Rally, Deletes Drop as Positioning Builds Up

There are 2 constituent changes for the STAR50 INDEX and 6 changes for the STAR100 Index at the September rebalance that will be implemented at the close on 13 September.
There are no surprises for the SSE STAR50 (STAR50 INDEX) while there are 3 surprise adds for the STAR100 Index with the profitability criterion being ignored.
The adds to the SSE STAR50 (STAR50 INDEX) have outperformed the deletes over the last month and positioning is larger in some stocks compared to others.

Merger Arb Mondays (02 Sep) – Canvest, China TCM, GA Pack, CPMC, Shinko, Arvida, SilverLake

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), Canvest Environmental Protection Group (1381 HK), China Traditional Chinese Medicine (570 HK), Greatview Aseptic Packaging (468 HK), Shanghai Henlius Biotech (2696 HK).
Lowest spreads: Tohokushinsha Film (2329 JP), Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP), Second Chance Properties (SCE SP), Fancl Corp (4921 JP), Alps Logistics (9055 JP).

Bajaj Housing Finance IPO: Offering Details & Index Inclusion

Bajaj Housing Finance (BHF IN) is looking to list on the exchanges by selling INR 65.6bn of stock at a valuation rumoured to be between INR 560-590bn.
The anchor allocations will be completed later this week, and the stock is expected to start trading on 16 September.
Bajaj Housing Finance (BHF IN)‘s maximum float will be around 10% and that will limit inclusion to just one global index in the following 6 months.

CPMC Holdings (906.HK) Privatization Update – ORG Is Pushing Baosteel to Raise Its Offer

By Xinyao (Criss) Wang

Huarui Offer has been approved by SAMR, which marks a solid step forward.Meanwhile, ORG’s management stated that the reduction of Huangshan Novel shares is to raise funds to acquire CPMC.
While Baosteel may want to “test the waters”, the signals ORG is sending is it will make every effort to advance the acquisition of CPMC and is accelerating the process.
The return on Huarui Offer isn’t attractive.We recommend waiting for Baosteel to raise its Offer, or simply choosing to add more positions in China TCM, whose privatization is more lucrative.

HK Connect SOUTHBOUND Flows (To 30 Aug 2024); Weak Econ Data, But a Rebound in SB Net Buys

SOUTHBOUND was a net seller the prior week for HK$1.5bn, the first week in 29 where SB was a net seller. It was all ETFs. Stocks were a net buy.
This week, they reverted to net buying. Financials and Utilities were strong net buys. ETFs again a net sell. Total SOUTHBOUND volumes also picked up.
SOEs, SOE Banks, Energy, Utilities, and finally Anta Sports Products (2020 HK) saw net buying after salutary earnings.

Alpha Generation Through Share Buybacks in Korea: Bi-Monthly (July and August 2024)

In this insight, we discuss the alpha generation through companies that have been buying back their shares in the Korean stock market in July and August 2024.
On average, the share buyback announcements by 46 companies represented 2% of outstanding shares.
Major companies that have announced share buybacks in Korea in the past two months include KT&G, Mirae Asset Securities, and POSCO Holdings.

A/H Premium Tracker (To 30 Aug 2024): SB/NB Volumes Down, NB Net Now Impossible to Track

Miserable economic data continues. Trade geopol is mixed. Territorial geopol getting more serious. SOUTHBOUND gross volumes up, but not high.
SOUTHBOUND rebounded cutting its weekly net sell streak at one. ETFs again a net sell. NORTHBOUND net data is not not released on a daily/weekly basis; only quarterly.
As expected (with AH 20d Premia returns at multi-year highs 3wks ago), AH Premia fell slightly, narrow premia falling more than wide premia. I continue to expect more H-vs-A gains.

EQD / NSE Vol Update / Skew & PCR Indicate Active Use of OTM Puts to Hedge NIFTY50 at All-Time-Highs

By Sankalp Singh

Recovery in Risk-Premia was short-lived. Pressure from a lack of upcoming event-risk has driven short-dated IVs lower.
Nifty50 at All-Time-Highs – PCR & Skew extend further towards puts. Implying active hedging of core long equity positions using OTM puts.
“High & Down” Vol-state persists. Expect a continued slide lower in IVs. Retain previous week’s tactical stance – allocations to Short Iron Condors & Skew Harvesting structures.

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Sep 01

Daily Brief Event-Driven: (Mostly) Asia-Pac M&A: Seven & I and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

(Mostly) Asia-Pac M&A: Seven & I, Silverlake Axis, Shanghai Henlius, CPMC, Shinko Electric, Arvida
Keep an Eye on Samsung C&T & SK Square as the Next Hot Picks for Value-Up Announcements
Weekly Deals Digest (01 Sep) – ESR, Canvest, China TCM, CPMC, Shinko, Silverlake, Terumo, Midea
Last Week in Event SPACE: Shin Kong/Taishin Financial, Jardine Matheson, Toyota Motors, Huafa Props
China Healthcare Weekly (Sep.1)-Biotech Sell Asset,Pharmaceutical Distribution Company,HEC CJ Pharma
(Mostly) Asia M&A, Aug 2024: Orora, Fuji Soft, J Tower, Seven & I, Taishin/Shin Kong, PropertyGuru

(Mostly) Asia-Pac M&A: Seven & I, Silverlake Axis, Shanghai Henlius, CPMC, Shinko Electric, Arvida

I tally 42 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals were discussed this week: the Taishin Financial Holding (2887 TT) / Shin Kong Financial Holding (2888 TT) merger; and Silverlake Axis (SILV SP)‘s hybrid Offer.
Key updates took place on Huafa Property Services (982 HK), Shanghai Henlius (2696 HK),CPMC (906 HK), Seven & I (3382 JP), Shinko Electric (6967 JP), and Arvida (ARV NZ).

Keep an Eye on Samsung C&T & SK Square as the Next Hot Picks for Value-Up Announcements

Construction and semiconductors are key targets due to their low value-up representation. For shareholder returns, keep an eye on Samsung C&T and SK Square.
Expect announcements before the mid-September value-up index, with early September releases mirroring LG Electronics’ prior notices and detailed plans arriving by Q4.
Even with prior notices, details will leak. Samsung C&T and SK Square are likely to prioritize short-term shareholder returns over long-term growth, potentially leading to a bigger price impact.

Weekly Deals Digest (01 Sep) – ESR, Canvest, China TCM, CPMC, Shinko, Silverlake, Terumo, Midea

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: Midea Group Co Ltd A (000333 CH) premarketing its H Share listing, Terumo Corp (4543 JP) placement and 99 Speed Mart Retail Holdings (99SPD MK) US$530 million IPO.
Event-Driven developments: ESR Group (1821 HK), Canvest Environmental Protection Group (1381 HK), China Traditional Chinese Medicine (570 HK), CPMC Holdings (906 HK), Shinko Electric Industries (6967 JP).

Last Week in Event SPACE: Shin Kong/Taishin Financial, Jardine Matheson, Toyota Motors, Huafa Props

CTBC’s (likely) goal is to boost Shin Kong (2888 TT)‘s shares, so as to make the Taishin Financial Holding (2887 TT) merger unpalatable for Shin Kong shareholders. That smells of opportunity.
Jardine Matheson Holdings (JM SP) is trading cheap to NAV and its implied stub. It may well get cheaper.
Toyota Motor (7203 JP)‘s resulting supply/demand profile is mixed, but on balance, expect to see positive demand into the H1 earnings announcement. Watch for another buyback possibly announced then.

China Healthcare Weekly (Sep.1)-Biotech Sell Asset,Pharmaceutical Distribution Company,HEC CJ Pharma

By Xinyao (Criss) Wang

Biotech will continue selling early-stage pipeline in a sluggish market, but this will further lower its valuation as financing won’t improve quickly.
Pharmaceutical distribution companies are facing challenges, driving ongoing consolidation in the industry. However, this trend will ultimately benefit the growth of leading companies in the long run.
If investors truly understand “the essence” of HEC Changjiang Pharma, they will be more calm/rational to look at this absorption merger and the inclusion of Hang Seng family of indexes.

(Mostly) Asia M&A, Aug 2024: Orora, Fuji Soft, J Tower, Seven & I, Taishin/Shin Kong, PropertyGuru

For the month of August 2024, 10 new transactions (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$56bn.
The average premium for the new transactions announced (or first discussed) in August was ~47%. The average premium YTD is ~44%.
This compares to the average premium for transactions in 2023 (117 transactions), 2022 (106), 2021 (165), 2020 (158), and 2019 (145 ) of 39%, 41%, 33%, 31%, and 31% respectively.

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Aug 31

Daily Brief Event-Driven: Brookfield Explores Sovereign Funds for Grifols Takeover Bid and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Brookfield Explores Sovereign Funds for Grifols Takeover Bid
Kum Yang: A Major Capital Raise Possible in 4Q24 Which Is Likely to Dilute Existing Shareholders
Potential Price Decline Amplification from NPS’s Appraisal Rights Exercise Against NCSoft
End of Mandatory Lock-Up Periods for 49 Companies in Korea in September 2024

Brookfield Explores Sovereign Funds for Grifols Takeover Bid

By Jesus Rodriguez Aguilar

Press reports Brookfield is seeking support from sovereign wealth funds, including those from Abu Dhabi (ADQ) and Singapore (GIC), to back its bid, though discussions remain in the early stages.
The news about the potential involvement of ADQ and GIC are positive as any support or addition of new investors increases the likelihood of a takeover bid for Grifols.
The discount is closing accordingly, at mid-session August 30, the share-price spread has tightened to 15.4%, the lowest ever. I suggest maintaining the position long B (or ADR)/short A shares.

Kum Yang: A Major Capital Raise Possible in 4Q24 Which Is Likely to Dilute Existing Shareholders

In the past week, there were numerous local news accounts about a rights offering of nearly 800 billion won by Kum Yang. This has not been confirmed by the company.
Although Kum Yang has not committed to a rights offering, there is a high probability of such capital raise in 4Q24 which is likely to dilute existing shareholders.
Kum Yang remains a highly speculative stock. The management has lost so much credibility in the past year. We would stay away from it as far as possible.

Potential Price Decline Amplification from NPS’s Appraisal Rights Exercise Against NCSoft

During NCSoft’s exercise period starting August 14, the spread was tight, with NPS likely to exercise rights if it widens above 5% in the final days.
NPS is unlikely to exercise its full 6.3% stake, but may sell 2% if the stock price drops below ₩180,000, widening the spread over 5%.
This may increase NCSoft’s division costs and overhang risk, potentially amplifying stock price decline. Monitoring NCSoft’s stock early next week is crucial.

End of Mandatory Lock-Up Periods for 49 Companies in Korea in September 2024

We discuss the end of the mandatory lock-up periods for 49 stocks in Korea in September 2024, among which 3 are in KOSPI and 46 are in KOSDAQ.
These 49 stocks on average could be subject to further selling pressures in September and could underperform relative to the market.
The top three market cap stocks including those of which at least 1% of outstanding shares could be sold in September include LS Materials, CIS, and Kyobo Securities.

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Aug 30

Daily Brief Event-Driven: LG Corp Plans to Purchase 200 Billlion Won of LG Electronics and 300 Billion Won of LG Chem and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

LG Corp Plans to Purchase 200 Billlion Won of LG Electronics and 300 Billion Won of LG Chem
Notable Developments in the November Review of the Global Index Korea Standard
Arvida (ARV NZ): 25th Sept Vote On Stonepeak’s Offer
Doosan Mergers: One Canceled, One Still Moving Forward
CPMC Holdings (906 HK): The Battle Is Heating up as ORG Clears a Key Regulatory Hurdle
Doosan Group Cancels Plans to Merge Doosan Robotics and Doosan Bobcat
First Case of New Pre-Disclosure Rule: LG Corp Buys ₩300B LG Chem Shares
Arvida Group (ARV NZ): Scheme Vote on 25 September
Quiddity Leaderboard BSE/SENSEX Dec 24: Zomato Needs F&O Membership to Avoid BSE 100 Deletion
CPMC (906 HK): SAMR Green Lights ORG’s Offer

LG Corp Plans to Purchase 200 Billlion Won of LG Electronics and 300 Billion Won of LG Chem

On 29 August, LG Corp announced that it plans to purchase about 200 billion won worth of LG Electronics and about 300 billion won worth of LG Chem.
After these share purchases, LG Corp’s stake in LG Electronics will increase from 30.47% to 31.59%, and its stake in LG Chem will increase from 30.06% to 31.29%.
LG Corp plans to purchases these shares starting 1 November 2024. The share purchases will be conducted in two stages and will be completed by 31 March 2025.

Notable Developments in the November Review of the Global Index Korea Standard

Hyundai Rotem is right on the edge for Small Cap→Standard, so it is the only one having a real chance of being included in the November review.
Doosan Robotics’ float rate will rise to 40% after issuing 20,219,376 new shares, making it a top candidate for inclusion among Outside IMI and comfortably surpassing the cutoff.
With high trading volume volatility, it’s early to predict passive impact. Watch for momentum buildup like LS Electric and monitor the trading volume of Hyundai Rotem and Robotics closely.

Arvida (ARV NZ): 25th Sept Vote On Stonepeak’s Offer

Back on the 22 July, Arvida (ARV NZ), a leading retirement living and aged care provider, announced a Scheme from Stonepeak at NZ$1.70/share, in cash, a 65% premium to undisturbed.
The Scheme Booklet is now out, with a Scheme Meeting to be held on the 25th September. Expected implementation on the 13th November.
The Scheme Consideration of NZ$1.70/share is within the Independent Adviser’s valuation range at NZ$1.63 to NZ$1.94/share. Arvida’s directors unanimously recommend shareholders to vote in favour of the Scheme.

Doosan Mergers: One Canceled, One Still Moving Forward

Maekyung reported that Doosan Robotics and Bobcat will cancel their merger, but the merger between Robotics and Enerbility’s spun-off company will proceed.
The merger’s risks have been overblown in Robotics’ stock, which might rebound. Bobcat’s stock outlook is uncertain, with fading merger hopes potentially hurting short-term sentiment.
The Robotics-Enerbility merger might also be canceled under regulatory pressure, but this could hurt Enerbility’s stock due to debt concerns; forcing the merger may increase costs.

CPMC Holdings (906 HK): The Battle Is Heating up as ORG Clears a Key Regulatory Hurdle

ORG Technology Co., Ltd. A (002701 CH) has received SAMR clearance, the key regulatory hurdle, for its HK$7.21 voluntary offer for CPMC Holdings (906 HK).
SAMR approval paves the way for the ORG precondition to be satisfied in September. Changping Industrial’s HK$6.87 offer first close is on 3 September.
Changping Industrial has little choice but to revise its terms. It has a short window to seize the initiative by bumping its offer before ORG’s competing and higher offer opens.

Doosan Group Cancels Plans to Merge Doosan Robotics and Doosan Bobcat

On 29 August, the Doosan Group announced that it is cancelling the merger between Doosan Robotics (454910 KS) and Doosan Bobcat Inc (241560 KS).
However, the plan to split Doosan Enerbility into a newco and then merge Doosan Bobcat with the newco will remain in place.
Doosan Group is still trying to complete the first two portions of reorganization (Split of Doosan Enerbility and Merger Swap Between Doosan Enerbility and Doosan Robotics), resulting in continued uncertainty.

First Case of New Pre-Disclosure Rule: LG Corp Buys ₩300B LG Chem Shares

LG Corp has announced it will buy ₩300B of LG Chem shares during trading hours, marking the first use of the new 30-day advance notice rule.
LG Corp will buy LG Chem shares in two stages with 30-day advance notices. So, today’s announcement is a preliminary notice ahead of these 30-day advance notices.
This transaction’s flow impact on LG Chem doesn’t seem substantial. But this first two-stage advance notice could provide key insights into price impact patterns.

Arvida Group (ARV NZ): Scheme Vote on 25 September

The Arvida (ARV NZ) IE considers Stonepeak’s NZ$1.70 offer fair and reasonable as it is within the NZ$1.63 to A$1.94 valuation range.
The transaction will require OIO approval, statutory supervisors’ consent and shareholder approval. The Metlifecare Ltd (MET NZ) precedent suggests that the OIO and statutory supervisor should be forthcoming.
The offer is attractive and recent changes in substantial shareholders are benign. At the last close and for the 13 November payment, the gross/annualised spread was 3.0%/15.2%.

Quiddity Leaderboard BSE/SENSEX Dec 24: Zomato Needs F&O Membership to Avoid BSE 100 Deletion

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, and 200 indices in the December 2024 index rebal event.
We see four expected ADDs/DELs for BSE 100 and six expected ADDs/DELs for BSE 200.
The BSE 100 handling rules for names without futures and options (F&O) sometimes punish companies that have enjoyed good share price rallies and Zomato could fall into such a trap.

CPMC (906 HK): SAMR Green Lights ORG’s Offer

ORG Technology (002701 CH), via the Offeror Huarui Fengquan Development Limited, has announced SAMR has given its approval. ORG still requires MOFCOM, NDRC, and SAFE to sign off.
Interestingly, SASAC/NCSSF-backed Champion Holdings, the competing/initial bidder for CPMC (906 HK), secured MOFCOM, NDRC, and SAFE before SAMR clearance. Champion’s regulatory pre-conditions took a little over seven months to secure.
What now? SAMR is China’s primary antitrust regulator (overlapping with NDRC). So this is positive for ORG. However, I’d still stick to ORG’s pre-condition long stop in terms of timing.

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Aug 29

Daily Brief Event-Driven: Jardine Matheson (JM SP): Trading “Cheap” and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Jardine Matheson (JM SP): Trading “Cheap”
Hyundai Motor’s Value-Up Disclosure: Trading Implications from Release Timing & Pref-Skewed Buyback
Huafa Props (982 HK): A Quick Word On Voting
Alpha Generation from the New Entries in the ‘KOSDAQ Rising Stars’
MV Australia Equal Weight Index Rebalance Preview: One Add & A Few Deletes
HM Sampoerna (HMSP IJ): Global Index Deletion Following IDX Segment Shift
Quiddity Leaderboard ES50 Sep 24: DSM Addition Unlikely; Engie Could Replace Kering (US$1bn+ Flows)
Impact of Woori Financial’s Tongyang Life Acquisition Below ₩1.5T on Value-Up Flows
Misunderstood Takeover Target
Silverlake Axis (SILV SP): Goh’s Hybrid Offer

Jardine Matheson (JM SP): Trading “Cheap”

I see Jardine Matheson Holdings (JM SP)‘s discount to NAV and implied stub at 12-month lows.
Recent interim results were okay. Stripping out DFI Retail Group Holdings (DFI SP)‘s outperformance, the remainder of the Jardine stable delivered weaker numbers.
Further afield, the implied stub is marginally below the long-term average since the Jardine Strategic Holdings (JS SP) circularity was collapsed in April 2021.

Hyundai Motor’s Value-Up Disclosure: Trading Implications from Release Timing & Pref-Skewed Buyback

Hyundai’s TSR target is 35%+ (dividends plus buybacks), up 10 percentage points from previous years. They’ve also set a new annual dividend of ₩10,000, paid evenly quarterly.
Hyundai’s Value-Up targets may not fully meet market expectations, but the key is the timing. By aligning early with government policies, Hyundai has reduced risks and secured investment flow.
Hyundai plans a pref-skewed buyback, likely continuing this approach as retiring preferred shares first may boost ROE.

Huafa Props (982 HK): A Quick Word On Voting

Huafa Property (982 HK) shareholders overwhelmingly approved (99.52% [of shares present and/or via proxy] FOR; 0.48% AGAINST) the Scheme yesterday. This part was expected. The headcount test was less certain.
The final headcount tally, on a look-through basis into HKSCC Nominees by CCASS Participants, was 111 FOR, 14 AGAINST. Again, a pretty clear pass.
Normally a Scheme Vote, if approved, wouldn’t warrant a full note. But when the headcount test is involved, it is worthwhile understanding the mechanics.

Alpha Generation from the New Entries in the ‘KOSDAQ Rising Stars’

In this insight, we discuss the potential alpha generation from new entries in the “KOSDAQ Rising Stars.”
For the KOSDAQ Rising Stars New Entries in 2023, there was a massive outperformance. Of course, we want to reiterate that past performance is NOT indicative of future performance.
On 28 August 2024, KRX provided a list of 39 KOSDAQ Rising Stars companies (including 29 existing ones and 10 new companies).

MV Australia Equal Weight Index Rebalance Preview: One Add & A Few Deletes

With 2 days left to review cutoff, there could be 1 inclusion and 3 deletions for the index at the September rebalance.
Even if there are no constituent changes, capping changes will lead to one-way turnover of 4.4% and a round-trip trade of A$212m.
The final list of inclusions/exclusions will depend on price movements till Friday and whether the index provider makes any significant changes to the free float of stocks in the universe.

HM Sampoerna (HMSP IJ): Global Index Deletion Following IDX Segment Shift

By Dimitris Ioannidis

HM Sampoerna (HMSP IJ) has been announced as a deletion from the Large cap of the Global Index at the September 2024 review.
The reason for the security’s removal is due to a change of listing from an eligible to an ineligible exchange segment of the Indonesian Stock Exchange (IDX).
Forecasted passive fund supply is ~$24.6m and ~11.9 ADV at the close of 20 September 2024. The significant ADV is because of the security’s low free float.

Quiddity Leaderboard ES50 Sep 24: DSM Addition Unlikely; Engie Could Replace Kering (US$1bn+ Flows)

By Janaghan Jeyakumar, CFA

The ES50 Index is one of the most highly-tracked indices in Europe and the annual index review takes place in September every year.
In this insight, we take a look at Quiddity’s estimation of the latest ranks of potential ADDs and DELs for the upcoming index rebal event in September 2024.
The rankings will be finalized at the end of this week. Currently, we see one expected ADD/DEL but the expectations can change since there are three more trading days left.

Impact of Woori Financial’s Tongyang Life Acquisition Below ₩1.5T on Value-Up Flows

Woori Financial’s value-up plan centers on improving the CET1 ratio to boost shareholder returns, with the total return ratio directly tied to the CET1 ratio.
The market believed that if the acquisition cost stayed under ₩1.9 trillion, the CET1 ratio impact would be minimal, potentially leading to mid-term gains from non-banking profits.
Though this may hurt Tongyang Life’s short-term stock, it opened the door for local institutional investors, especially NPS, to consider Woori Financial for value-up investments.

Misunderstood Takeover Target

By Jesus Rodriguez Aguilar

Allfunds Group, a global WealthTech firm born in Spain, attracts market interest, but no firm offers yet. Its top two shareholders (48.1%) are open to selling at the right price.
Since listing, Allfunds’ total return has been -59%, driven by interest rate hikes, major distributors shifting to low-risk assets, stock overhang from top shareholders, and low share liquidity.
ChatGPTAllfunds’ forward P/E of 12.9x (vs. peers at 18.6x) and 9.5% FCF yield undervalue its strong business model, momentum, market share gains, robust cash conversion, and solid balance sheet.

Silverlake Axis (SILV SP): Goh’s Hybrid Offer

Goh Peng Ooi, the Executive Chairman and founder, has made a voluntary unconditional general Offer for the 25.9% in Silverlake Axis (SILV SP) not held.
The S$0.36/share cash Offer for the software solutions play is a 20% premium to last close. Or a 31.9% premium to the 12-month VWAP.
The quirk in the terms is the option to receive A$0.30/share (in cash), plus one new redeemable preference share in the Offeror, to be redeemed at A$0.18/share after five years.

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Aug 28

Daily Brief Event-Driven: Updates on The Couche-Tard Deal for 7&I (3382 JP) and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Updates on The Couche-Tard Deal for 7&I (3382 JP)
Toyota Partial Offer Results – What Next?
Kioxia & Tokyo Metro: Japan’s Largest IPOs Since 2018 Expected This October
Huafa Prop (982 HK)’s CCASS Movements: Nothing To See Here
KOSPI 200 December Rebalancing: Key Points to Watch for in Proactive Position Build-Up
Tohokushinsha Film (2329 JP): 3D Persists Despite Strong Pushback
Understanding Potential Issues Within SK Group from Hynix’s Kioxia CB Conversion
MV Australia A-REITs Index Rebalance Preview: One Close Add & Capping Changes
JSE Sep 24 Rebalance: PPH Expected to Enter Top 40, AMS to Fall Out
LG Corp: Three Key Catalysts + NAV Valuation

Updates on The Couche-Tard Deal for 7&I (3382 JP)

Today saw the publication of three different articles regarding the Alimentation Couche-Tard (ATD CN) approach and offer to purchase all the shares of Seven & I Holdings (3382 JP)
The first in the Nikkei said ATD could push offer a high price, even up to ¥8 trillion. The second mentioned debt financing being feasible because of prodigious cash flow.
The third in Bloomberg noted that 7&i had requested the government upgrade its FEFTA status to “core”, which would lead to a more burdensome/restrictive government approval process.

Toyota Partial Offer Results – What Next?

Today after the close, Toyota Motor (7203 JP) reported the results of their ¥800bn Tender Offer Buyback, originally intended to repurchase 290.12mm shares from cross-holders.
In the end, 343.83mm shares were tendered (53.71mm shares more than originally expected, worth about ¥150bn at Tender Price). That creates back-end “issues” which must be considered.
The resulting supply/demand profile is mixed, but on balance, I expect sees positive demand into the H1 earnings announcement. Watch for another buyback possibly announced then.

Kioxia & Tokyo Metro: Japan’s Largest IPOs Since 2018 Expected This October

By Dimitris Ioannidis

Kioxia and Tokyo Metro with valuations of ~$10bn and ~$4.6bn are expected to be listed in October 2024 and become the largest Japanese IPOs since Softbank Corp (9434 JP) in 2018.
Kioxia Holdings (6600 JP) is currently forecasted to fail fast entries of both Global indices due to low IPO free float.
Tokyo Metro is expected to be added via fast-entry in one Global Index because of higher IPO free float. Forecasted demand of ~$140m is expected on the fifth trading day.

Huafa Prop (982 HK)’s CCASS Movements: Nothing To See Here

Ahead of Huafa Property Services Group (982 HK)‘s Scheme Meeting tomorrow, the 28th August, 42.57% of shares outstanding moved out of CCASS on the 8th July.
One argument for Huafa trading wide-ish to terms is due to “suspicious” CCASS moves between the Offer announcement and the vote.
Some investors even cite the Golden Throat Holdings (6896 HK) debacle. This is not a Golden Throat situation. Not even close. It is decidedly less interesting and benign.

KOSPI 200 December Rebalancing: Key Points to Watch for in Proactive Position Build-Up

The momentum for getting ahead on positions with KOSPI 200 rebalancing is holding steady. With around 60% of the screening period behind us, it’s time to start preparing our positions.
The current rebalancing’s screened changes have a relatively lower price volatility, suggesting a stronger chance for more aggressive position build-up now compared to previous rebalancings.
Trading volumes vary greatly among these changes, affecting their passive impact sizes. Consider using different weights in basket trading instead of equal weights.

Tohokushinsha Film (2329 JP): 3D Persists Despite Strong Pushback

On 24 July, 3D Investment Partners proposed to privatise Tohokushinsha Film (2329 JP) through a tender at JPY600-650. 3D has extended the offer validity period from 23 to 30 August.
The controlling shareholder, Mr Hisako, claims he is not a seller regardless of price. The Board goes through the motions, knowing that Mr Hisako will decide the offer’s fate.
3D’s persistence suggests that Mr Hisako’s resolve might be checked by bumping the offer. As this outcome is likely, the shares will continue to trade through terms.

Understanding Potential Issues Within SK Group from Hynix’s Kioxia CB Conversion

Hynix’s potential 15% stake in Kioxia doesn’t violate the 20% rule because KFTC’s mandatory stake rule doesn’t apply to foreign investments.
SK Group may transfer Hynix’s 15% Kioxia stake to SK Square by splitting Hynix and merging its investment arm with SK Square for future AI investments.
SK Square may attract more attention than Hynix short-term, as Kioxia’s stake via Hynix could boost market expectations for value transfer to SK Square.

MV Australia A-REITs Index Rebalance Preview: One Close Add & Capping Changes

The review period for the September rebalance ends on 30 August. We do not see any constituent changes for the index but there will be capping changes.
Home Consortium Ltd (HMC AU) is just outside inclusion zone at the moment and outperformance over the rest of the week could result in inclusion.
Home Consortium Ltd (HMC AU)‘s inclusion and capping changes will result in a one-way turnover of 5% and in a round-trip trade of A$62m.

JSE Sep 24 Rebalance: PPH Expected to Enter Top 40, AMS to Fall Out

By Charlotte van Tiddens, CFA

Last night, the price snapshot was taken for the JSE September rebalance. The rebalance is scheduled to take place during the closing auction on Friday the 20th of September.
PPH is expected to enter the Top 40 with AMS falling out. No changes are expected for the FINI, FINDI, INDI or RESI.
There are several noteworthy free float changes across ALSI constituents, particularly amongst foreign counters (detail below).

LG Corp: Three Key Catalysts + NAV Valuation